Wednesday, June 21, 2006
American Values #3: Living Within Our Means
Once upon a time, American citizens saved a portion of their income. Likewise, their government was a net creditor to other nations, exporting more than it imported. Over the last fifteen years or so, these conditions are no longer so. The Empire is now a debtor nation, relying upon foreign central banks to accept and hold large numbers of dollars and exporting less than it imports (other than food and weapons, what is the Empire actually producing these days? Wags say that the buying and selling of homes to each other now constitutes the major portion of the country's economy...). Similarly, the US savings rate has fallen from 7.5% to below zero in that time period. The practice of using one's home as an ATM has long been noted as unsustainable, an effect of an asset (real estate) bubble. As with most things, there is usually an unpleasant day of reckoning: in this case, the gradual decline of the dollar relative to other currencies, a very slow--so as not to cause a crash--shift away by the foreign central banks, and a steep rise in foreclosures as interest rates begin their inevitable rise. This will come at a particularly inopportune time: the Empire will need more funds to keep afloat. Let us once again note that this is only the beginning as the Empire and its citizens rediscover reality with an extended visit to the House of Pain: Social Security and Medicare are going to begin paying out more than they take in as the bulging Boomer generation retires in a financial fog, believing that a magical, mythical pension will appear and take care of them. Chaos believes that this generation still has lessons to (re)learn, particularly about getting something for nothing and "old fashioned" values like thrift.